Starting with a fully invested A-share portfolio to become a capital...

Chapter 10 Buy on Dips
Changan Automobile is a legitimate state-owned enterprise and a second-tier subsidiary of China Ordnance Equipment Group, giving it a strong background.

On February 7, 2009, Changan Automobile announced the second generation of the "Yuexiang" passenger vehicle, which was officially assembled and produced at the fifth factory and began pre-sales in the mountainous city market.

On March 18 of the same year, the Changan Yuexiang was officially launched, offering four models: Basic, Comfort, Luxury, and Premium, with a price range of 53,900 to 60,900 yuan.

The Yuexiang is Changan Automobile's fourth domestically produced sedan, following the Benben, Jiexun, and Zhixiang. Its main slogan is: good-looking, easy to drive, and fuel-efficient.

In addition, Changan Automobile's A-shares and B-shares were suspended from trading simultaneously from October 10, 2008. At that time, the company issued an announcement stating that it was planning a major event involving a major asset restructuring. The suspension lasted for nearly 5 months and trading resumed on February 16, 2009.

During the five-month trading suspension, the market was abuzz with speculation and commentary.

Two relatively reliable short essays are…

I. Repurchase and cancellation of B shares.

II. Integrate the downstream automotive parts industry chain.

Many stock investors know about A-shares and H-shares, but few can explain what B-shares are.

The official name for B shares is Chinese currency special shares, also known as domestically listed foreign shares. They refer to shares raised by a joint-stock company from overseas investors and listed in China.

Changan Automobile's B shares were issued on September 28, 1996, totaling 250 million shares.

Because the domestic capital market was not fully open at the time, in order to alleviate the shortage of funds and promote the reform of domestic enterprises and economic development, B shares specifically for foreign investors were created.

Because of these expectations, the market has very high expectations for Changan Automobile.

In the first month after trading resumed, February 2009, the stock price rose by as much as 75.48%, and in the second month it soared to 13.98%, with a two-month increase of over 89.46%.

The surge in stock price in the second month corresponded to the strong sales of the "Yuexiang" model and confirmed the market's announcement of the repurchase of B shares.

Now it's the third month since Changan Automobile resumed trading. The market has fully digested the two major positive factors: "repurchase of B-shares" and "major asset restructuring." The funding situation has also shown a clear divergence, which is a good thing for Zhang Yang.

Why is it considered a good thing?
Capital divergence means sideways trading and fluctuations.

True trading masters prefer sideways consolidation.

What makes the stock market so fascinating is precisely the T-trading during sideways consolidation, a skill that top traders inevitably learn.

Sideways trading is a relatively fair period, an excellent time for small investors to profit.

Because when you try to buy at the bottom, you never know when the bottom will be, and besides, can you compete with institutions that have inside information?
As for chasing high prices, both institutional investors and speculative funds have the right to act first.

Sideways movement is similar to a corner in racing; speed in a corner is what truly matters.

Of course.

Sideways movement doesn't mean you can just randomly do T+0 trades.

First, it is necessary to determine whether there is regional bottom support, as well as the situation regarding funding and performance.

Take Changan Automobile as an example. After being suspended from trading for five months, it received two major positive developments, plus subsidies from the rural car purchase program, making a total of three positive factors driving its growth.

In addition, after the 2007 stock market crash, its decline was 86.17%, which is clearly an oversold condition, and its valuation also needs to be repaired.

Furthermore, with the improvement of the overall environment and the increase in demand for commodities, future performance has been strongly supported.

Zhang Yang believes that the 89.46% increase over two months is merely a valuation correction, not a sign of a market top.

It is also worth mentioning that Changan Automobile's stock price fell from 24.58 yuan to a low of 3.4 yuan, a drop of 86.17%. However, after the market resumed trading in February, the stock price rose by 89.46% from 3.4 yuan, and its stock price was only 6.44 yuan.

Why are there such big differences in stock prices even though the price changes are similar?

This is because when stock prices fall, the base is large, and the absolute amount of the decline is large. When prices rise, the base is small, and even if the increase is the same, the absolute amount of the increase is smaller. Therefore, the final stock price is significantly different from the previous high price.

Many people have a misconception about stock trading: they think that if the stock price drops by 5% today, it will rise by 5% tomorrow and they can break even. This is actually wrong.

这导入公式就可以计算，设初始价格为1，下跌5%后的价格为1×(1-5%)= 0.95，设上涨的百分比为x，要回到原价1，则0.95×(1+x)=1，解方程可得x=1/0.95-1≈0.0526，即5.26%。

In other words, a 5% drop requires a 5.26% rise to break even on the initial investment. This is why many people feel they are losing money inexplicably.

Throughout the morning session, Zhang Yang only made two trades, each time buying 50,000 yuan worth of goods.

As the market opened at 1 p.m., he continued searching for the lowest point of the fluctuation.

And at the same time.

He keeps a close eye on banking and securities indices.

The banking index represents market stability, while the securities index represents market trend. If either index shows directional fluctuations, he will immediately stop trading and wait for the trend to become clear.

At 13:34 PM, 10 units were purchased.

At 13:52 PM, 10 units were purchased.

At 14:30 PM, 10 units were purchased.

I bought 15 shares during the closing auction at 10 PM.

During the period of accumulation and consolidation, Zhang Yang also took the opportunity to trade JAC Motors, selling at a high of 20 yuan and buying it all back at 1.4:22 PM, thus gaining a 14% unrealized profit.

After the market closed, Zhang Yang sent Lai Weijie a QQ message saying, "Today is over."

"Let me see."

Lai Weijie replied very quickly.

He quickly logged into his securities account and switched to the demo account. When he saw that the account's total increase for the day was 0.77%, he couldn't help but question Zhang Yang's abilities.

After much hesitation, he sent a QQ message asking, "Brother Yang, there are only 14 trading days left. The total increase in my account is only 3.96%. Are you sure we can achieve a total return of 50%?"

The current increase is 46.04%, and the average increase over 14 trading days is 3.28%, which is the minimum required increase.

[Zhang Yang]: Don't worry, if we don't make it into the top ten, I will give you a full refund.

[Lai Weijie]: Okay, brother, I'm counting on you. If you can get into the top ten in your major, I'll give you an extra 2000 yuan as a reward.

[Zhang Yang]: Don't worry, there won't be any problems.

After closing the chat window, Lai Weijie looked at the total profit of his securities account. Now he could only place his hopes on Zhang Yang.

He believed he couldn't achieve an average increase of 3.28% over 14 trading days unless he tried to gamble on the stock price.

Buying on the limit up is not the same as buying on the dip. If you don't do it properly, it's normal to get five or six limit downs. He doesn't dare to try it easily.

"Don't let me down, Zhang Yang," Lai Weijie muttered to himself.

……

After the market closed on April 2nd, all 122 students majoring in investment sent their profit charts to the class group, which were then compiled and reported by the class monitor.

Today's top performer is Wang Liu. Perhaps realizing his position in the top ten was in jeopardy, he went to the Dragon and Tiger List to buy stocks at the limit up price, achieving a return of 6%, a full 4.2% higher than the second-place He Jing.

This successful trade also brought Wang Liu back into the top five, with a total return of 34%.

Currently, the top ten total returns for investment majors are...

First place: He Jing 41.2%
Second place: Xu Jiafeng 37.6%
Third place: Dong Lulu 36%
……

Ninth place: Yin Shichang 31.7%
10th place: Yu Zhigao 29.8%
As trading days become fewer, more and more students are inclined to engage in limit-up trading.

Hitting the board is like gambling; one thought can lead to heaven or hell. This is also the last resort for students outside the top ten to catch up.

(End of this chapter)